ABF reports 'good start to new financial year'

Strong sales at Primark underpinned a promising start the new financial year at Associated British Foods (ABF), the diversified international food, ingredients and retail group.

In a trading update, delivered during an annual general meeting on Friday, Charles Sinclair, Chairman of the ABF, said: "Trading for the group in the first two months of the new financial year has been good, primarily driven by Primark, where the momentum that delivered the strong finish to last year has continued, but the critical Christmas trading period lies ahead."

"In the conclusion to my statement in the annual report I said that we expected a reduction in profit from AB Sugar for the full year, as a result of our lower EU production, but this would be more than offset by further growth at Primark and some recovery in Grocery. This continues to be our view," he added.

"We expect the group to make some further progress in this new financial year but, in contrast to last year, this will be weighted towards the first half."

The news comes shortly after the group published strong annual financial results for the year ending September 15th. Group revenue rose 11% to £12.3bn buttressed by doubling sales at Primark.

Adjusted operating profit rose 17% to £1,077m and dividends per share rose 15% to 28.5p.

The group posted a net capital investment of £707m while operating profit rose 4% to £873m.

Primark's rate of growth increased over the year with sales of £3.5bn, more than double those of five years ago. New stores opened in Germany and the group reported that the Berlin branch set a new Primark record for sales made on the first day of trading.

Capital expenduiture on Primark, which created 10,000 new jobs across the UK and continental Europe in 2012, reached £326m last year. The group said it expected a high level of expenditure on Primark to continue.

The year wasn't without challenges however as evidenced by the results of ABF's Grocery and Ingredients business segments. A mix of strong competition, a continued strain on consumer spending and high costs for a number of commodities led to lower profitability in both.

George Watson, Chief Executive Officer of ABF, said: "These are very good results for the group and include exceptional performances from AB Sugar and Primark. Global economic uncertainty remains but we have opportunities for further investment and the strength of the group balance sheet and a strong cash flow will enable us to pursue them with confidence."

The group's share price rose 0.54% to 1,483p per share at 13:41 on Friday.

MF